HCA boosts 2021 guidance after outpatient surgery volumes improved in Q1

HCA Healthcare Inc. beat consensus expectations for the first quarter and increased its full-year 2021 guidance after the healthcare facilities company recorded strong revenue growth, particularly in March.

The Nashville, Tenn.-based company's revenue grew 8.7% year over year to $13.98 billion in the quarter. The growth was due in large part to high-acuity inpatient volumes, better payer-mix and higher outpatient and surgical volumes in March, HCA CEO Samuel Hazen said during an April 22 earnings call.

Because of the COVID-19 pandemic, many patients have been delaying outpatient care and surgeries, leading to steep declines in these outpatient and surgery volumes for hospital companies over the last year. However, Hazen noted that outpatient revenues during the first quarter increased 4.7% compared to the same period a year earlier — an improvement over the declines of about 5% seen in the third and fourth quarters of 2020.

"Outpatient revenues declined in January and February, consistent with that trend, but March, which had one additional weekday this year, increased by 30% as outpatient surgery and other procedures recovered strongly," the CEO said during the April 22 call.

Hazen also said that same-facility outpatient surgery volumes grew 2.3% in the first quarter compared to the same period of 2020. Same facility inpatient surgeries, however, declined 5.4%, according to the company's earnings release.

"The outpatient surgery activity in March of 2019 per business day was pretty much identical to the outpatient surgical volume per business day in 2021," Hazen noted.

Like fellow hospital chain Tenet Healthcare Corp., HCA operates many facilities in the southern U.S., which was negatively impacted by Winter Storm Uri in February. However, Hazen noted that for the most part, the company was operational in Texas, one of the states hardest hit by the storm, within a week.

HCA's revised guidance for 2021 is for earnings between $13.30 and $14.30 per diluted share, up from $12.10 and $13.20. The company also raised its adjusted EBITDA to $10.85 to $11.35 billion from $10.3 billion and $10.9 billion.

Executives noted that this guidance does not include two acquisitions of small hospitals that are supposed to close in the second quarter or the acquisition of a majority stake in Brookdale Senior Living Inc.'s home health and hospice business, which should close in the third quarter.

Regarding the Brookdale transaction, Hazen said one of the reasons the deal was attractive was because 60% to 70% of Brookdale's home health agencies overlap with HCA's markets, and HCA believes that the home will become increasingly important to healthcare.

"Home care opportunity and hospice opportunity to us, we believe, is a significant expansion of the services we offer, and the opportunities for integrating those patients who are discharged — and we discharge about 250,000 patients a year into home care — creates an opportunity for us to coordinate care better, stay connected to the patient after they leave our facilities and ultimately integrate them more effectively in the HCA healthcare system," Hazen said.

For future M&A deals, the CEO said that the company has a solid balance sheet that should allow it to take advantage of presented opportunities.

By the numbers

HCA's first-quarter non-GAAP net income attributable to the company, excluding gains on sales of facilities and losses on retirement of debt, was up 77.7% to $4.14 per share from $2.33 in the year-before period, according to the company's release. The S&P Capital IQ consensus normalized net income estimate was $3.32 per share.

Adjusted EBITDA for the quarter was $3.05 billion, a 38.6% increase compared to $2.2 billion the year prior.

CEO Hazen said the company's facilities treated nearly 50,000 COVID-19 in-patients in the first quarter, which represented 17% of total admissions in January, 8% of total admissions in February and almost 5% in March.

Hazen also noted that total same facility admissions were down 4.2% year over year and 3% from 2019, which was in line with expectations.